Equity markets were in the red today due to mounting tensions between the U.S. and North Korea, concern over historic gains by nationalist parties in German elections forcing Angela Merkel to form a coalition government, and increasing jitters over whether the FED hikes rates one more time in 2017 or not.

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

The IG Corporate WTD total is 35.14% of this week’s syndicate midpoint average forecast or $6.75b vs. $19.21b.

MTD we’ve priced 105.02% of the syndicate forecast for September or $118.096b vs. $112.45b.

There are now 7 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

Hudson Pacific Properties LP upsized today’s 10-year Senior Notes new issue to $400mm from $300mm at the launch and at the tightest side of guidance.

The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 12 IG Corporate-only new issues was <18.29> bps. Including today’s IG-rated Federal Realty $25 par preferred, the average compression of today’s 13 new issues was <17.85> bps.

BAML’s IG Master Index was unchanged at +111. +106 represents the post-Crisis low dating back to July 2007.

Investment grade corporate bond trading posted a final Trace count of $13.5b on Friday versus $17.5b on Thursday and $12.7b the previous Friday.

The 10-DMA stands at $17.3b.

The “QC” Geopolitical Risk Monitor

Risk Level/Main Factor

Geopolitical Risks

HIGH
North Korea

On 9/24 Trump warns NOKO leadership that if rhetoric threats continue its leaders “won’t be around much longer.” NOKO responds saying it has the right to shoot down U.S. bombers “even outside of NOKO air space.” Beijing termed calls situation “grave.” On 9/19 Trump spoke before UN referring to Kim as “Rocket Man on a suicide mission.” Says if Kim continues to threaten the U.S., allies and the world “we will have no choice but to totally destroy North Korea.” On 9/14 North Korea launched another ballistic missile over Northern Japan in the face of UN Security Council sanctions. Trump warned U.S. military options are “effective and overwhelming”. Missile traveled 2,300 miles landing in the Pacific. Guam is 2,131 from NOKO! On 9/03 NOKO detonated a 100 kiloton hydrogen bomb 5-times more powerful than that dropped on Nagasaki causing a 6.3 magnitude earthquake. Head of IAEA said hydrogen bomb test is “new dimension of global threat” to the world. On Tuesday, 8/29 NOKO launched an ICBM over Japan that landed in the Pacific Ocean. On Monday, 9/04 U.S. Amb. to the UN, Nikki Haley said “the time has come to exhaust all diplomatic means to end this crisis.” Called for strongest sanctions vs. NOKO. Friday 8/11 Trump said “U.S. military solutions are in place, locked and loaded” matching his earlier “fire and fury” statement. On Th. 8/10 NOKO announced its plan to “pre-emptively strike Guam in mid-August.” Trump’s reaction, “Maybe my “fire and fury” threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s Hwasong-14 missile can reach any location in U.S.

ELEVATED

Germany’s Angela Merkel re-elected to her 4th term but nationalist Alternative for Germany (AfD) party & other right wing parties gain to force a 6-party coalition government. Worst performance for Merkel’s CDU and Christian Social Union party since 1949. Immigration a source of tension. Right wing has a seat in German decision-making.

On July 28th Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. The Brookings Institute calls Pakistan “the world’s most dangerous country.” Democracy in nuclear-armed country with 205m population at risk.

EU and Macron-Merkel coalition to squeeze U.K. for all it can re: BREXIT “divorce” bill. Companies prepping for hard BREXIT & 2 years of weak growth. PM May wants rolling series of meetings with EU. UK withdrawal from EU takes place in March, 2019.

CAUTION“U.S. political gridlock”

GOP to release tax overhaul plan week of Sept. 25th & Senate will vote on new Graham-Cassidy healthcare bill to repeal Obama Care. Consensus GOP support to pass legislation still in doubt. Partisan politics. Trump recently bypassed GOP to close a deal w/Dems to extend debt limit to December.

September MTD Terror Stats: Despite destroying the Caliphate, ISIS is now scattered across a wider MENA region and Europe. September MTD there were 87 terrorist attacks. killing 347 people and wounding 581.

Syndicate IG Corporate-only Volume Estimates For This Week and September

IG Corporate New Issuance

This Week
9/25-9/29

vs. Current
WTD – $6.75b

September 2017

vs. Current
WTD – $118.096b

Low-End Avg.

$18.17b

37.15%

N/A

N/A

Midpoint Avg.

$19.21b

35.14%

$112.45b

105.02%

High-End Avg.

$20.25b

33.33%

N/A

N/A

The Low

$10b

67.50%

$100b

118.096%

The High

$30b

22.50%

$125b

94.48%

Sneak Preview of “Thank You For Your Service”

Friday, October 9th is Veteran’s Day here in the U.S., and in recognition of this important day, I thought it fitting to share a sneak preview of an upcoming film that is getting a lot of buzz in the industry.THANK YOU FOR YOUR SERVICE profiles a group of U.S. soldiers returning from Iraq who aer struggling to integrate back into family and civilian life, while living with the memory of a war that threatens to destroy them long after they’ve left the battlefield. The film stars Miles Teller and Haley Bennett. The film is the directorial debut of Jason Hall, a graduate of my alma mater, the University of Southern California’s School of Cinematic Arts or “SCA” and is based on the non-fiction book by David Finkel and adapted for the screen by Finkel and Hall. The Universal Pictures production opens in theatres on Wednesday, October 27th. As an SCA Alum, I am doing my part to get the word out from my corner desk here at our nation’s oldest Service Disabled Veteran broker dealer. Considering this past weekend’s controversies surrounding the NFL, rights, freedoms and respect of our flag, country, service men and women and first responders, I thought that perhaps we should all make it a point to see “Thank You For Your Service” at our local theatres when it’s released. The ensemble cast tackles myriad veteran-focused situations, disorders and struggles pertinent to today’s public discourses. The film overlays nicely with the Service Disabled Veteran mandate that we are all dedicated to here each and every day at Mischler Financial.

Here’s the preview:

Have a great evening and FIGHT ON!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate

The Best and the Brightest” Fixed Income Syndicate Forecasts and Sound Bites for Next Week

Today’s IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for Next Week

Indexes and New Issue Volume

This Week’s IG New Issues and Where They’re Trading

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending April 19th

IG Credit Spreads by Rating

IG Credit Spreads by Industry

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

What with the French Election this Sunday combined with today being a Friday session there was no new issuance to speak of in the IG dollar DCM. That’s now two consecutive days without IG issuance. I was out for two Fridays so, today is the first “Best & Brightest” edition since March 31st. Next week looks to be a relatively subdued one given continued blackouts and the fact that most all the big FIGs have already issued. As corporates exit and Treasuries rally with yields set to pull down further, all this leads up to what should be a VERY ROBUST May. The average for next week across the top 24 syndicate desks surveyed is $19.46b. The high was one desk that thinks we’ll see $30b and the low came from two desks that both said $10-15b or an average of $12.5b. But why let me tell you? I’m here for them. Please allow me to introduce you to the people who price YOUR deals. They’re all waiting below with their numbers and thoughts for next week’s IG Corporate issuance. So, without further ado folks…..let’s get to it!

Please remember to read the bold italicized question I posed to the Best & the Brightest as it contains this week’s complete data download that should be helpful to you.

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

I am happy to announce that the “QC” once again received 100% unanimous participation from all 24 syndicate desks surveyed for today’s “Best & Brightest” edition! 19 of those participants are among 2017’s YTD top 20 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. 22 are in the top 25 in that same table. The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates). The participating desks represent 82.36% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility. But it’s not only about their volume forecasts, it’s also about their comments! This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from. It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

As always “thank you” to all the syndicate desks that participated in today’s survey. I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read! You are helping to promote Mischler’s value-added DCM proposition while adding readership to the “QC” that won Wall Street Letter’s Award as Best Broker Dealer Research in our financial services industry for three consecutive years! That’s 2014, 2015 and 2016 !! More importantly, however, you are helping the nation’s oldest Service Disabled Veteran broker-dealer grow in a more meaningful and sustainable way. So, thank you all! -RQ

My weekly technical data re-cap and question posed to the “Best and the Brightest” early this morning was prefaced as follows:

“Good morning and Happy Friday!

First, here are this week’s IG new issue volume talking points:

The U.S. six-pack banks posted overall positive earnings. This week five of those for banks – ex-GS who did not yet print – represented 59% of this week’s IG Corporate issuance or $14.75b vs. $25.04b.

Spreads across the four IG asset classes widened 2bps to 18.00 bps vs. 16.00 bps as measured against their post-Crisis lows..

The 19 major industry sectors also widened by 3.53 bps to 23.16 vs. 19.63 also against their post-Crisis lows.

For the week ended April 19th, Lipper U.S. Fund Flows reported an inflow of $1.446b into Corporate Investment Grade Funds (2017 YTD net inflow of $43.426b) and a net outflow of $362.223m from High Yield Funds (2017 YTD net outflow of $4.271b).

Taking a look at the secondary trading performance of this week’s IG and SSA new issues, of the 22 deals that printed, 14 tightened versus NIP for a 63.75% improvement rate while 6 widened (27.25%) and 2 were flat (9.00%).

Entering today’s Friday’s session here’s how much we issued this week:

IG Corps: $25.04b

All-in IG (Corps + SSA): $25.54b

This Sunday is the first round of the French presidential election. Congress returns to work on Monday in the continuing saga of Dysfunction Junction to address the debt ceiling, another rumored stab at repealing and replacing Obama Care, and any signs of tax reform. According to a very high end military official, the Korean peninsula has now reached its most intense point since the Korean War. Syria, Turkey, Russia loom large and a terror event that took place last evening in Paris, resulting in the death of a police officer in the heart of the city, are some of the major global event risk factors playing out in our inextricably global-linked world economy.

Please let me know your thoughts and numbers for next week’s IG Corporate new issue volume. Thank you in advance for your time.

Have a great weekend!
Ron Quigley, Managing Director and Head of Fixed Income Syndicate

Below please find the replies to this week’s QC canvass of fixed income syndicate bookrunners and my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

How It Happened Across the U.S.A.
Dr. Scott MacDonald Writes a Piece for the “QC”

Smith’s Research and Gradings – The Global Economic Doctor on the Election of 2016 and its Implications

Investment Grade New Issue Re-Cap

IG Primary & Secondary Market Talking Points

Syndicate IG Corporate-only Volume Estimates for This Week and November

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending November 2nd

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

One of the great things about being in this business for 26 years are the superlative friends and colleagues I have had the privilege to know and work with during that time. There’s a saying that you are as good as the people around you. I have been blessed with stellar talent and thought leaders throughout my career. One such person is Dr. Scott MacDonald, who I have occasionally quoted here in the “QC.” Scott B. MacDonald or as I’ve always referred to him as simply “The Doctor”, is Chief Economist at Smith’s Research & Gradings. Prior to his current post, he was Senior Managing Director and Chief Economist at KWR International, Inc. Prior to that was Head of Research for MC Asset Management LLC, an asset management unit of Mitsubishi Corporation based in Stamford, Connecticut (2012-2015) and Head of Credit & Economics Research at Aladdin Capital (2000-2011) where he and I worked closely together. He served as Chief Economist for KWR International (1999-2000) prior to which he worked at Donaldson, Lufkin & Jenrette, Credit Suisse and the Office of the Comptroller of the Currency (in Washington, D.C.). He was ranked by Institutional Investor magazine as one of the top sovereign analysts in the financial services industry.

Scott did his Ph.D. in Political Science at the University of Connecticut, Masters in Asian Studies at the University of London’s School of Oriental and African Studies, and BA in History (Honors) and Political Science at Trinity College (Hartford). He has written 18 books and has had numerous articles published. His areas of expertise are macroeconomics, international finance and geopolitical risk.

I am privileged and honored to present “The Doctor’s” piece on President-elect Donald Trump’s Election Day victory that was penned today and appears here in the “QC”.

Smith’s Research and Gradings – The Global Economic Doctor on the Election of 2016 and its Implications

The U.S. presidential election of 2016 was decidedly one for the history books. Although 2016 is certainly not 1860, which led to the U.S. Civil War, it was a dirty, brutal and personalized campaign that tapped into the angst of a voting public angry with widening socio-economic disparities, sub-par economic growth and a dysfunctional Washington.

Why did Donald Trump, the Republican candidate, win?

Public frustration with Washington’s corruption and its seeming ineffectiveness in addressing the country’s major problems. Clinton was clearly seen as more of a Washington insider than Trump, who has never held an elected political office before.

The ongoing whiff of corruption that surrounded Democratic contender Hillary Clinton (not that Trump is a saint), related to her emails and the finances of the Clinton Foundation. Past Clinton “scandals” did not help.

The intervention of the FBI and WikiLeaks into the electoral process via disclosing embarrassing emails, which only maintained attention of Clinton’s email scandal. Furthermore, having her name associated with former Congressman Anthony Weiner (with his sexting scandal) obviously did not help Clinton in the last days of the campaign.

The growing divisions in U.S. society, especially along an urban-rural divide. One thing that gave Trump an appeal to many living in rural areas was that he appeared to listen to them and mocked the political correctness that many found stifling.

The Democrats underestimated Trump. As General Colin Powell stated: “No battle plan survives contact with the enemy.” This was certainly the case of Clinton with Trump.

The appeal of a strongman leader. The last reflects a major paradigm change in global politics – the rise of strongman leaders, who offer simple solutions to complex problems. Considering the scope of U.S. problems and the challenging nature of international relations, Trump’s “tough guy” persona was a point of attraction to some voters. There are certainly echoes of this in other countries.

What next? A Trump victory was not expected by global markets or political leaders in many other countries (many of whom have been critical of the Republican leader now president-elect). The next week is likely to see an unwinding of the “Clinton trade” (risk on) in global debt and equity markets, downward pressure on oil prices, and a further pounding of the Mexican peso.

Investors find a Trump victory unsettling from the standpoint that during the campaign he was anti-trade, opened up the possibility of negotiating the U.S. debt, and wants to overhaul of the U.S. alliance system around the world (such as with NATO). The last time the U.S. embraced protectionist trade policies in a major fashion was the 1930s, in the form of the Smoot-Hawley Tariffs. U.S. protectionism was a major cause of the deepening of the global Depression. The extent of the market downdraft will depend on Trump’s acceptance speech, his comments on policy matters before he gets into the White House and who he appoints to his cabinet.

The major challenge in the days ahead will be to find a way to reunite the country after the election. In many regards, this may be an impossible process, considering the bad blood between Democrats and Republicans since 2008. A dangerous development in U.S. politics is the destruction of the political center – the area where compromise and dialogue are reached and policies can move forward.

The U.S. sovereign ratings are Aaa/AA+/AAA, with a stable outlook. The policy format of the incoming Trump administration will no doubt be carefully examined, in particular on its debt management and trade policies.

For American politics to become more workable, President Trump will have to demonstrate an ability to lead, but also work within a constitutional system that he might find constraining. As he moves to “drain the swamp”, Trump will have to make the transition from candidate to elected official and from someone who is critical of Congress to a leader who will have to find the means to work with it. For their part, both the Republican Party (which held on to both the Congress and Senate) and Democratic Party will have to adjust to a President who has not emerged from their ranks. A new Washington looms on the horizon – hopefully it works.

Here’s a review of this week’s key primary market driver averages for IG Corporates only through Wednesday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS

MON.
11/07

TUES.
11/08

WED.
11/09

AVERAGES
WEEK 10/31

AVERAGES
WEEK 10/24

AVERAGES
WEEK 10/17

AVERAGES
WEEK 10/10

New Issue Concessions

<3> bps

N/A

N/A

<0.87> bps

<0.51> bps

3.31 bps

1.87 bps

Oversubscription Rates

2.50x

N/A

N/A

3.32x

2.61x

3.05x

3.28x

Tenors

4.50 yrs

N/A

N/A

11.33 yrs

7.77 yrs

9.16 yrs

11.51 yrs

Tranche Sizes

$472mm

N/A

N/A

$491mm

$818mm

$1,137mm

$640mm

Avg. Spd. Compression
IPTs to Launch

<16.5> bps

N/A

N/A

<17.87> yrs

<17.42> bps

Indexes and New Issue Volume

Index levels are as of 2:00pm ET

Index

Open

Current

Change

LUACOAS

1.34

1.34

0

IG27

75.757

74.823

<0.924>

HV27

172.135

170.27

<1.865>

VIX

18.74

15.45

<3.29>

S&P

2,139

2,158

19

DOW

18,332

18,541

209

USD

IG Corporates

USD

Total IG (+SSA)

DAY:

$0.945 bn

DAY:

$0.945 bn

WTD:

$0.945 bn

WTD:

$0.945 bn

MTD:

$8.411 bn

MTD:

$8.411 bn

YTD:

$1,177.192 bn

YTD:

$1,507.076 bn

Lipper Report/Fund Flows – Week ending November 2nd

For the week ended November 2nd, Lipper U.S. Fund Flows reported an outflow of $2.495b from Corporate Investment Grade Funds (2016 YTD net inflow of $40.292b) and a net outflow of $4.116b from High Yield Funds (2016 YTD net inflow of $6.954b).

Over the same period, Lipper reported a net inflow of $146.468m into Loan Participation Funds (2016 YTD net outflow of $1.518b).

“The Best and the Brightest”- Fixed Income Syndicate Outlook (Beyond Labor Day)

“Knowing the Past for the Future” – A Look at a Decade’s Worth of September IG Corporate Issuance

From Quig-litz to Stiglitz: Is There A Solution? A Northern and Southern Euro!

This Week’s IG New Issues and Where they’re Trading

Lipper Report/Fund Flows

Investment Grade Credit Spreads

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Nothing…..zero..de nada!…Hasta la vista! The market is now officially in summer vacation mode folks. Sure we might get some opportunistic issuers looking to get in ahead of the September rush, however, I was able to speak with all the major syndicate desks today. My survey/poll was two-fold – to gauge volume forecasts for the remainder of August($5.44b) and separately, for September issuance projections ($116.02b). Several commented that the September tally is fluid because issuers are discussing pulling forward their issuance, so take it from me when I tell you to “err to the upside!”

September is traditionally a busy month (scroll down to my “Knowing the Past for the Future” section) as I take a look back at a decade’s worth of September IG issuance for each of IG Corporate, SSA and all-in volume. The Fed mentioned the Italian banking crisis twice in their minutes yesterday. The EU is coming undone. Vlad-the-Terrible Putin has a green card to annex Crimea and he will take full advantage of the fact that the EU cannot focus on him in their rearview mirror. Putin knows this and he’ll take full advantage of it. The EU has too many troubles of its own. We have a Presidential election on Tuesday, November 8th that could very well compress issuance from the standard stretch run to Thanksgiving (November 24th) by 12 days as a result. When you err, err to the upside.

IG Primary & Secondary Market Talking Points

Taking a look at the secondary trading performance of this week’s IG Corporate and SSA issues, of the 15 deals that printed, 12 tightened versus NIP for a 00% improvement rate while only 2 widened (13.33%) and 1 were trading flat (6.67%).

“The Best and the Brightest” – Syndicate Forecasts and Sound Bites for the Remainder of August and September

I am happy to announce that, once again, the “QC” received unanimous responses from the 22 syndicate desks surveyed in today’s Best & Brightest poll. 20 of those participants are among 2016’s top 22 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. In fact, all of today’s 20 participants finished in the top 25 of last year’s final IG Corporate Bloomberg league table. The 2016 League table can be found on your terminals at “LEAG” + [GO] after which you select #201 (US Investment Grade Corporates). Today’s cumulative underwriting percentage of the participating desks was 80.29% which simply means they’re the ones with visibility. But it’s not only about their volume forecasts, it’s also about their comments! This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from. It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

Syndicate IG Corporate-only Volume Estimates for the Remainder of August & September

IG Corporate New Issuance

Remainder of August
8/19-8/31

September 2016

Low-End Avg.

$4.45b

$115.45b

Midpoint Avg.

$5.44b

$116.02b

High-End Avg.

$6.43b

$116.59b

The Low

$0b

$80b

The High

$15b

$150b

A Look at How the Voting Brackets Broke-Out for the Remainder of August & September

Remainder of August

September

1: 0b

1:80-85b

1: 1-2b

2: 100b

1: 2b

1: 105b

1: 2-3b

1: 100-110b

3: 0-5b

3: 110b

1: 3b

3: 115b

4: 5b

1: 110-120b

2: 5-7b

2: 120b

1: 5-7.5b

6: 125b

2: 5-10b

1: 130b

4: 10b

1:150b

1: 5-15b

“Knowing the Past for the Future” – A Look at a Decade’s Worth of September IG Corporate and SSA Issuance

Across the past ten years, all-in dollar-denominated IG Corporate plus SSA September new issuance averaged $117.55b.

Over the past five years, all-in IG September new issuance averaged $138.49b.

Over the past three years, all-in IG September issuance has averaged $157.58b.

The past three years of September saw IG Corporate onlyissuance average $127.88b.

September SSA issuance has averaged $29.71b across the last three years.

August
(Year)

All-in IG Issuance (bn)

IG Corps
only (bn)

SSA
only (bn)

2015

119.65

106.06

13.59

2014

160.96

124.25

36.71

2013

192.14

153.32

38.82

2012

143.74

124.62

19.12

2011

75.98

52.51

23.47

2010

130.14

112.41

17.73

2009

136.89

78.90

57.99

2008

29.89

17.58

12.31

2007

107.39

85.36

22.03

2006

78.73

61.41

17.32

Note: includes TARP/TALF & FDIC insured issuance

The question posed to the “Best and the Brightest” early this morning was prefaced with the following:

“Good morning and Happy Thursday is Friday for me! I will be taking my annual block leave beginning tomorrow morning and returning to my corner desk on Tuesday, September 6th. It would seem summer vacations are now on the docket for the remainder of the month. August all-in IG Corporate plus SSA issuance managed to break thru the $100b mark for the first time in history. We currently stand at $104.75b. WTD issuance has dropped off measurably to $8.44b thus far for IG Corporate only prints. Before I leave there are over 3,000 readers of the “QC” interested in knowing your thoughts and numbers for the remainder of August as well as your projections for September issuance.

This week we priced $8.698b of all-in IG Corporate and SSA issuance. IG Corps were $8.448b or only 60% of this week’s syndicate midpoint average forecast calling for $14.09b.

Week-on-week demand for IG corporate credit primary paper strengthened versus last week posting an average bid-to-cover rate of 4.26x vs. 3.56x. Average NICs tightened 6.10 bps to an average negative <4.27> bps vs. last week’s +1.83 bps. Average tranche sizes decreased to $603mm per issue vs. $735mm. Average tenors extended by an average 2.56 years to 11.73 years against last week’s 9.17 years.

Finally, what are YOUR thoughts and number for the remainder of August and separately for September IG issuance?

Thank you as always in advance. Let’s give the readership a nice read to close out the summer and to prepare for the stretch run.
Best wishes to you and yours thru Labor Day! –Ron”

……..……and here are their formidable responses:

(Remainder of this section exclusive to distribution list recipients)

From Quig-litz to Stiglitz

This morning Bloomberg TV featured an interview with Columbia University economist and professor as well as Nobel laureate Joseph Stiglitz, who expressed his opinion that if the Euro Zone continues on its current dysfunctional path, it should split up! It’s gotten lots of air time, coverage and traction. He referred to such a split as an “amicable divorce” with “two or three different currency zones.” I watched it and had two comments to make. The first was that Mr. Stiglitz looks like guitarist Joe Walsh might look when the latter turns 75 with a beard. Then I found out that Stiglitz is 73 while Joe Walsh is 65. I guess all those lost years kept Joe W. young at heart and with age. Anyway, the other comment I made was “hey I wrote about the EU splitting into two zones with two currencies a long time ago.” I then went searching thru prior “QC’s to find it. Here it is in its entirety written and distributed to you, if you were onboard the “QC” on January 27th, 2015 you’ll have on your desktops. (more…)

It was a subdued day today for the IG dollar primary markets as eager anticipation surrounded ECB President Mario Draghi’s latest and greatest tool kit inventions and implementations. No multi-tranche transaction would price in the face of the predictably unpredictable ECB today. More on that in a bit.3 IG Corporate issuers printed 5 tranches between them totaling $2.7b assisted by the SSA’s lone Republic of Panama’s $1b 12-year bringing the all-in IG day total to 4 issuers, 6 tranches and $3.7b.

Super Mario Day! You Gotta Be Kiddin’ Me, Right?……….Wrong!

Now before you think I’ve gone completely nuts, you need to read this. It’s from the Mario Day website. You know, the REAL Super Mario, as opposed to the impostor at the ECB. It reads, “In recognition of everyone’s favorite pizza-loving Nintendo character, today, Thursday, March 10th is “Mario Day.” I kid you not. It continues, “..with plenty of ideas, games and activities to choose from, such as fancy dress parties and mushroom stomping competitions, you can be sure to make “Mario Day” a day to remember.” I repeat, this is NOT a joke.

“Back it up! No wait…Get a Bigger Truck……..Draghi’s Doing the Driving!”

….However, I was thinking that perhaps in a frenzy of jealousy/envy the other Super Mario…. you know, this guy:

…I might have taken it all a bit too personally. For today was all about the ECB’s Mario Draghi. Here’s a nice sound bite from friend, former BNP Paribas colleague and Bloomberg’s First Word European Primary Market Strategist, Paul Cohen, who nicely sums up today’s Euro IG primary markets, “There were no syndicated primary deals in Europe today as the market awaited the ECB’s latest rates decision. It’s the first day without a deal since February 9th and ends 8 consecutive business days of non-financial corporate issuance.” As someone quipped post this morning’s ECB conference, “I think it’s time to back the truck up, or maybe even get a bigger truck. Mr. Draghi is doing the driving.” And boy, did he do some driving today. Let’s take a look:

My Take on the EU? Did Someone Say, “Nightmare?” E-Break?

The ECB cut its three key interest rates and will buy investment-grade euro-denominated corporate bonds. The ECB’s main refi rate was lowered by 5 bps to 0%, its marginal lending rate was also cut by 5 bps to 0.25%; its deposit rate was cut by 10 bps to -0.4%. The ECB also said it will increase the pace of its monthly asset purchases by €20b to €80b from €60b starting in April, and will add investment-grade euro denominated bonds issued by non-bank corporations to the list of eligible assets. The ECB CANNOT buy richer yields than the ECB’s deposit rate. So, by moving their deposit rate to -0.4% from -0.3% and by increasing their monthly purchases to €80b from €60b it necessitates that they start to buy corporates. Hence, the announcement of their new Euro-denominated corporate bond purchase tool.

It’s as if Draghi tore a page out Mario Day festivities because his ECB announcement certainly provided plenty of ideas, games and activities to choose from. There were no fancy dress parties nor were there any mushroom stomping competitions but Draghi’s “tool kit” was introduced “on-the-fly” not after a long trial and error period as in R&D. What he unveiled to the world has never been done before…….for good reason – it’s a desperate move to salvage the unsalvageable. As you all know here, the EU is facing a terrible aging population dilemma, an immigration issue resulting in border controls and national demarcation lines being re-introduced, spreading Nationalism and a terrorist concern that resulted in today’s French travel advisory warning on the British government’s website:

“There is a high threatfrom terrorism. Due to ongoing threats to France by Islamist terrorist groups, and recent French military intervention against Daesh (formerly referred to as ISIL), the French government has warned the public to be especially vigilant and has reinforced its security measures.”

As one longtime trusted market relationship wrote to me this afternoon, “first off, I didn’t think there was that much “non-bank” corporate debt in the euro-universe! The Committee will decide if the asset (possibly a Financial, but not a BANK?) is eligible for purchase. I foresee corporate bond spreads tightening, but by how much and will they go negative?” Now, it seems however, that the ECB is a player in the market and companies are directing their fixed payments to them. In other words, they are being paid to hold specific companies’ debt — of their choosing. This comment sounds rather like “Sure, I’ll take that off your hands — for a price.” The role of the ECB seems even more questionably large – call it “outsized” in that they’re setting rates, regulating banks (SSM) and now playing the market?

That’s not that far off folks. Living for the moment is never a good plan. Let’s think, however, about the likely resultant paths for the EU. There is NO sign of inflation in the EU. There are signs of DEFLATION. History shows that the “D” word is a country killer and a war creator. Draghi gets to be Super Mario for another day and rates/currencies traders who make a living moment by moment, have more movement to capitalize on but, in the end, this means the EU is more of a disaster than everyone thought. (I am an exception as I’ve always maintained that it’s full speed ahead for them straight into a brick wall). It’s desperation time. As European banks suffer, today’s news should come as yet another major alarm as to just how bad the situation is over there. Negative rates mean that the problem will persist perhaps forever. Yes, I did say “forever.” EU leadership began at the onset of the Financial Crisis playing “kick-the-can” with good old fashioned procrastination and government and bureaucratic delay tactics until that game became an embarrassment. Now it’s a whole new ball-game. They are changing many more rules of engagement to postpone the inevitable. It will end badly…..really badly. The Schengen Agreement has already fallen to the wayside and that’s one the EU’s two legs that it stands on. The other leg being the single currency itself. EU problems are profoundly foundational. They need to raise the house and re-do their foundation and then reset the broken home. It’s THAT bad. I still maintain that the EU crumbles into two-parts a Northern Euro and a Southern Euro. Been saying that for over five years.

It’s a proverbial E-Break.

So, where’s that leave us? Well, despite the comedic caucuses taking place in this election year, the Unites States of America is the world’s finest tuned engine. It’s the best story and most stable of the myriad global event risk factors out there. As for our IG primary markets, it’s very clear. Perhaps, clearer than ever before. Your eyes should be focused on the 1.93% CT10 yield. Digest the fact that across the 4 major IG asset classes spreads have tightened 22.25 bps in 3 ½ weeks since February 12th. Low UST rates plus tightening spreads equals one thing readers [treasurers, bankers and syndicate managers] and simply put: PRINT NOW.

Global Market Recap

ECB Meeting/Draghi: ECB pulls out all stops & what was Draghi thinking?

Economic – Claims data continues to impress but today belonged to the ECB/Draghi.

Currencies – Big day for Euro & bad day for DXY Index with wide trading ranges.

Commodities – Crude oil down and gold up.

CDX IG: -4.68 to 91.53

CDX HY: -15.97 to 462.32

CDX EM: -3.47 to 333.40

IG Primary Market Talking Points

KKR & Co. LP upsized today’s $25 par PerpNC5 to $300mm from $150mm.

For the week ended March 10th, Lipper U.S. Fund Flows reported an inflow of $2.176b from corporate investment grade funds (2016 YTD net outflow of $3.961b) and a net inflow of $1.796b from high yield funds (2016 YTD net inflow of $4.403b).

The average spread compression from IPTs thru the launch/final pricing of today’s 5 IG Corporate-only new issues and one IG-rated Preferred was 25.90 bps.

Syndicate IG Corporate-only Volume Estimates for March

IG Corporate New Issuance

March 2016

vs. Current
MTD – $61.12b

Low-End Avg.

$115.59b

52.88%

Midpoint Avg.

$116.13b

52.63%

High-End Avg.

$116.67b

52.39%

The Low

$100b

61.12%

The High

$150b

40.75%

Have a great evening!

Ron Quigley

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.(more…)